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Did Hedge Funds Make The Right Call On MAXIMUS, Inc. (MMS) ?

Insider Monkey has processed numerous 13F filings of hedge funds and successful value investors to create an extensive database of hedge fund holdings. The 13F filings show the hedge funds’ and successful investors’ positions as of the end of the first quarter. You can find articles about an individual hedge fund’s trades on numerous financial news websites. However, in this article we will take a look at their collective moves over the last 4.5 years and analyze what the smart money thinks of MAXIMUS, Inc. (NYSE:MMS) based on that data and determine whether they were really smart about the stock.

MAXIMUS, Inc. (NYSE:MMS) was in 26 hedge funds’ portfolios at the end of the first quarter of 2020. MMS shareholders have witnessed an increase in enthusiasm from smart money of late. There were 24 hedge funds in our database with MMS holdings at the end of the previous quarter. Our calculations also showed that MMS isn’t among the 30 most popular stocks among hedge funds (click for Q1 rankings and see the video for a quick look at the top 5 stocks).

Video: Watch our video about the top 5 most popular hedge fund stocks.

Hedge funds’ reputation as shrewd investors has been tarnished in the last decade as their hedged returns couldn’t keep up with the unhedged returns of the market indices. Our research was able to identify in advance a select group of hedge fund holdings that outperformed the S&P 500 ETFs by more than 58 percentage points since March 2017 (see the details here). We were also able to identify in advance a select group of hedge fund holdings that’ll significantly underperform the market. We have been tracking and sharing the list of these stocks since February 2017 and they lost 36% through May 18th. That’s why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.

Noam Gottesman GLG Partners

Noam Gottesman of GLG Partners

At Insider Monkey we scour multiple sources to uncover the next great investment idea. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. Hedge fund sentiment towards Tesla reached its all time high at the end of 2019 and Tesla shares more than tripled this year. We are trying to identify other EV revolution winners, so we are checking out this tiny lithium stock. Now we’re going to go over the fresh hedge fund action encompassing MAXIMUS, Inc. (NYSE:MMS).

How have hedgies been trading MAXIMUS, Inc. (NYSE:MMS)?

At Q1’s end, a total of 26 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 8% from the previous quarter. On the other hand, there were a total of 20 hedge funds with a bullish position in MMS a year ago. So, let’s examine which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

According to Insider Monkey’s hedge fund database, Claus Moller’s P2 Capital Partners has the number one position in MAXIMUS, Inc. (NYSE:MMS), worth close to $44.1 million, accounting for 5.3% of its total 13F portfolio. The second most bullish fund manager is AQR Capital Management, managed by Cliff Asness, which holds a $28.1 million position; less than 0.1%% of its 13F portfolio is allocated to the company. Remaining members of the smart money that are bullish consist of Noam Gottesman’s GLG Partners, Renaissance Technologies and Chuck Royce’s Royce & Associates. In terms of the portfolio weights assigned to each position P2 Capital Partners allocated the biggest weight to MAXIMUS, Inc. (NYSE:MMS), around 5.28% of its 13F portfolio. 12th Street Asset Management is also relatively very bullish on the stock, designating 1.62 percent of its 13F equity portfolio to MMS.

As aggregate interest increased, key hedge funds were breaking ground themselves. 12th Street Asset Management, managed by Michael O’Keefe, established the biggest position in MAXIMUS, Inc. (NYSE:MMS). 12th Street Asset Management had $4.3 million invested in the company at the end of the quarter. Benjamin A. Smith’s Laurion Capital Management also made a $1.3 million investment in the stock during the quarter. The following funds were also among the new MMS investors: Greg Eisner’s Engineers Gate Manager, Michael Gelband’s ExodusPoint Capital, and Jonathan Soros’s JS Capital.

Let’s also examine hedge fund activity in other stocks – not necessarily in the same industry as MAXIMUS, Inc. (NYSE:MMS) but similarly valued. These stocks are PS Business Parks Inc (NYSE:PSB), HUYA Inc. (NYSE:HUYA), Woodward Inc (NASDAQ:WWD), and OneConnect Financial Technology Co., Ltd. (NYSE:OCFT). This group of stocks’ market valuations resemble MMS’s market valuation.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
PSB 17 83370 2
HUYA 18 265315 -3
WWD 24 222038 2
OCFT 3 1431 -6
Average 15.5 143039 -1.25

View table here if you experience formatting issues.

As you can see these stocks had an average of 15.5 hedge funds with bullish positions and the average amount invested in these stocks was $143 million. That figure was $133 million in MMS’s case. Woodward Inc (NASDAQ:WWD) is the most popular stock in this table. On the other hand OneConnect Financial Technology Co., Ltd. (NYSE:OCFT) is the least popular one with only 3 bullish hedge fund positions. Compared to these stocks MAXIMUS, Inc. (NYSE:MMS) is more popular among hedge funds. Our calculations showed that top 10 most popular stocks among hedge funds returned 41.4% in 2019 and outperformed the S&P 500 ETF (SPY) by 10.1 percentage points. These stocks gained 12.3% in 2020 through June 30th but still managed to beat the market by 15.5 percentage points. Hedge funds were also right about betting on MMS, though not to the same extent, as the stock returned 21.6% in Q2 and outperformed the market as well.

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Disclosure: None. This article was originally published at Insider Monkey.